Creativity Out the Windows?
When Ross Perot talked about a “giant sucking sound,” he was predicting the impact of the North American Free Trade Agreement on U.S. jobs. Little did he know that a much bigger suction effect was already in action: Microsoft Corp.’s operating systems.
Windows 98 brought the wrath of the Justice Department by fully integrating the Internet Explorer Web browser. But the acquisitive history of Microsoft operating systems suggests that the move was about as surprising as the company’s 95% market share in PC operating systems this year, according to market research firm Dataquest in San Jose.
Browser, fax, CD player, painting, performance speed-up, file viewer, typefaces. . . . Since 1983, Microsoft has been steadily absorbing what were once stand-alone products into various forms of DOS, its original operating system, and its successor, Windows. The consequences for computer users, say analysts and industry executives, have been decidedly mixed.
From the obscure (“disk defragmentation” utility) to the addictive (solitaire) to the essential (tools that control a printer), Microsoft has bought, licensed, reinvented, copied--and at times has been accused of stealing--these and other applications over theyears. In the process, Windows has become a cornucopia of features and tricks at an incredible price--free with a new PC.
Yet many experts see Windows as a ponderous hodgepodge of mediocrity that absorbs software functions like a giant amoeba, retards competition and reduces consumer options.
Given this history, why did it take the integration of Internet Explorer with Windows to provoke the Justice Department?
In part because an integrated operating system saves consumers the headache and expense of patching together stand-alone products to obtain similar results.
And if Windows puts some software vendors out of business, it frees others from the chore of continually reinventing the wheel--for example, a word processor or calendar doesn’t require a complex set of instructions to store a file or display a graphical image.
“These things are invisible to consumers, but to developers it’s ‘Hallelujah, you’ve made my life better,’ ” said Tod Nielsen, general manager for developer relations at Microsoft.
In theory, this should result in better software with fewer incompatibilities. Critics point out, however, that system or application crashes still occur with maddening regularity.
“It’s hard to think of anything Microsoft has done really well,” said Jeffrey Tarter, editor of the industry newsletter Soft-Letter. “Their defense historically is that they’ll put a simplified version of a product in the operating system and that this will help [other software makers] market a more sophisticated version. So everybody wins.”
The marketplace doesn’t always respond according to plan, however. “There’s no question that there’s less product diversity and less innovation,” Tarter said. But on the whole, he added, consumers seem willing to trade the benefits of competition for the convenience of getting everything in one package.
For large applications, competition usually benefits users, said software market analyst Chris LeTocq of Dataquest, pointing to Microsoft Money and Intuit’s Quicken personal finance products. After Microsoft’s attempt to acquire Intuit was frustrated by the courts, he said, “you ended up with two extremely aggressive products.”
Utilities--the behind-the-scenes services that keep a computer running efficiently--often follow a different path.
For example, when uninstallers--small applications that erase obsolete software--were new, competition led to innovative approaches. But after developers solved the big challenges, Microsoft adopted its own adequately effective uninstaller in Windows. With such generic categories, consumers happily settle for efficient mediocrity.
Bargains Versus Consumer Choices
But have innovation and competition in the industry been stifled in the process?
“Microsoft has continually changed the operating system to the benefit of customers,” said Gordon Eubanks, chief executive of Symantec Corp., one of the few PC utilities companies that have remained strong. “The complexity of the operating system drives our opportunity.”
But other software executives wonder if an apparently self-evident bargain might ultimately limit consumer choice in unforeseen ways.
In a Windows-dominated world, says Douglas P. Colbeth, chief executive of Naperville, Ill.-based Spyglass Inc., consumers have benefited. “But is it good for overall innovation in the long term? The jury is still out. Some innovations don’t take place quickly because of the concern that they will be incorporated into the operating system.” Few executives risk investing in a vanishing market, Colbeth said.
In fairness, non-Microsoft operating systems follow a similar integration path, as do application programs. For example, independent spell checkers have virtually vanished as they’ve been absorbed into word processors.
Of course, many industry observers blame feature bloat--the tendency to abandon simplicity in an effort to make every product “the Swiss Army knife” of its category--on the competitive approach of a certain company in Redmond, Wash. The rejoinder, of course, is that consumers get so much more for their money, or, in the case of Windows, for free.
“Free” can be deceiving, though. Microsoft Windows 98 costs computer manufacturers about $70, compared with about $1 to $2 for DOS back in the early 1980s, according to analysts. Microsoft’s prices have risen steadily but invisibly to most consumers, who get the operating system as part of a PC purchase. Microsoft argues that new features justify rising prices. Yet while hardware manufacturers could make the same claim, prices plummet year after year in the highly competitive PC market.
One company that demonstrates these pricing contradictions is TV Host Inc., based in Harrisburg, Pa. TV Host provides an automated programming guide, either as a retail product or free to purchasers of new PCs through agreements with PC makers.
When Microsoft integrated a simple version of such a guide into Windows 98, TV Host suddenly found manufacturers unwilling to pay fees to include the TV Host software with new computers.
The PC companies “all acknowledge that our product is superior--even Microsoft agrees with this,” said Michael Jeffress, TV Host vice president of business development. “But 99% of everybody is going to go for what’s free.”
Or not quite free. PC manufacturers pass on the increasing cost of a growing Windows to consumers, yet in this case consumers get an inferior TV-preview product.
“The danger is that it prevents advancement in technology and innovation. It [creates] disincentives for companies to bring out products, because they are not going to get distribution,” Jeffress said. “The best product is not being brought to the consumer because of Microsoft’s anti-competitive business practices.”
While Windows’ girth has proved a mixed bag for consumers, the landscape is littered with the carcasses of companies flattened by the Microsoft steamroller when faced, as the industry adage goes, with the choice of being part of the car or part of the road.
But in the volatile software industry, companies expire daily as start-ups with a better idea take their place. Is there any evidence that consumers are harmed by Windows swallowing markets that once-thriving companies established?
Microsoft’s Nielsen couldn’t think of a single case in which the incorporation of a small application--such as Notepad (a mini-word processor) or Paint--into Windows has driven any software vendor out of business.
And as for makers of such tools as file compression or anti-virus utilities, Nielsen says that if they can’t adapt to change, it’s not Microsoft’s fault. He briefs software makers well in advance of the release of new versions of the operating system in an effort to help them find a new niche.
‘There Are No Birthrights’
“You need to accept that change is a power in our industry. There are no birthrights,” Nielsen said.
Many industry observers agree. It’s a software axiom, said Colbeth, that “any good utility or capability in the PC space makes its way into the operating system.”
He should know. In 1994, Microsoft licensed his company’s Web browser technology to form the basis for Internet Explorer. Spyglass received $13.1 million in royalties, a sum Microsoft critics viewed as paltry, considering that Explorer became the core of the company’s Internet strategy. That strategy famously included a decision to give away the browser, first as an adjunct to Windows 95, then as an integrated component of Windows 98, in effect locking up the browser market as a competition between Microsoft and Netscape Communications.
At the time, Spyglass had 18 people and $80,000 in the bank. “You can look at it as us having been screwed, or you can look at it as an opportunity to build a company. I view it as the latter,” Colbeth said.
After some hard times, Spyglass developed a new business creating Web software for hand-held devices and set-top boxes.
“It’s easy to get slaughtered, and it’s hard to reinvent yourself. But when you do reinvent yourself, you come out as a much stronger company,” Colbeth said.
Even Marina del Rey-based Quarterdeck Corp., a struggling utilities maker that just last week agreed to be acquired by Symantec, says it subscribes to that perspective. Though Microsoft decimated Quarterdeck’s market when it absorbed memory management into Windows, the company says Microsoft deserves credit for building up the utilities market by educating consumers about the value of utilities by including them in Windows.
So forgiving a view of a powerful competitor seems understandable given the experience of Stac Inc. A few years ago, San Diego-based Stac refused to grant Microsoft a license for its file-compression technology, objecting to Microsoft’s terms. Microsoft later added a competing compression application to DOS, effectively cutting the legs from under Stac’s market. The company successfully sued Microsoft for allegedly stealing its compression technology. But in the face of a countersuit by Microsoft, the companies settled out of court. Now Microsoft owns a piece of Stac.
Rampant rumors about similar strong-arm tactics terrify potential antagonists, analysts say.
“Almost everybody needs some access to Microsoft’s development teams and marketing programs,” Tarter said. “I’m hard-pressed to think of anybody who would publicly pick a fight with Microsoft. It’s a suicidal gesture, because Microsoft retaliates.”
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Desktop Dominator
Since 1983 Microsoft DOS and Windows have integrated or included scores of formerly stand-alone software products--including utilities, games, typefaces and simple word-processing and painting programs--making them part of the operating system plumbing. Some key examples:
Wordpad
Internet Explorer
CD-player
Paintbrush
Calculator
Telnet
Disk defragmenter
E-mail and Fax
Uninstaller
* MICROSOFT TRIAL
Government faces uphill battle as antitrust trial opens. A1
